Case Law Details
Cavendish Industries Ltd. Vs State Of U.P. And 3 Others (Allahabad High Court)
In the case of Cavendish Industries Ltd. vs State of U.P. and Others, the Allahabad High Court quashed orders imposing a tax penalty on the petitioner. The case involved a consignment of tyres and tubes sent to Bajaj Auto Ltd., where a typographical error occurred in the E-way bill dates. The petitioner argued that the error was unintentional, with no intent to evade tax. The Additional Chief Standing Counsel for the State maintained that the proceedings were in accordance with the law. However, the court, referencing a similar case (M/s Hindustan Herbal Cosmetics v. State of U.P.), emphasized that mens rea, or intent to evade tax, is essential for imposing a penalty. The court found no such intent in this case and declared the penalty unlawful. Consequently, the orders dated February 22, 2020, and March 19, 2019, were set aside. The court directed the State to refund the tax and penalty paid by Cavendish Industries within four weeks, allowing the writ petition in favor of the petitioner.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard learned counsel appearing on behalf of the petitioner and the learned Additional Chief Standing Counsel for the State.
2. This is a writ petition under Article 226 of the Constitution of India, wherein the petitioner is aggrieved by the order dated February 22, 2020 passed by the respondent No.3/Additional Commissioner, Grade-2 (Appeal)-II, State Tax, Agra and the order dated March 19, 2019 passed by the respondent No.4/Assistant Commissioner, Mobile Squad, Unit-5, Agra, Division Agra.
3. Contention of the petitioner is that the petitioner’s company sent a consignment of manufactured goods namely tyres and tubes to M/s Bajaj Auto Ltd., Aurangabad, M.H., against four tax invoices. E-way bills were also generated with respect to the tax invoices. However, at the time of generating the E-way bills, due to bona fide mistake, the dates were wrongly mentioned as ‘08.03.2019’ instead of ‘07.03.2019. Apart from the above factual position, there was no other infraction on the part of the petitioner. It is further submitted that there was a bona-fide mistake on the part of the person in generating E-way bills and there was no intention to evade payment of tax.
4. Per contra, learned Additional Chief Standing Counsel for the State submits that the proceedings initiated against the petitioner is in accordance with the rules and provisions provided under the statutory provision. The impugned proceedings were initiated after due adjudication of the facts and materials on record. Hence, the same are just and proper.
5. This Court in M/s Hindustan Herbal Cosmetics v. State of U.P. and Others (Writ Tax No. 1400 of 2019 decided on January 2, 2024) held that mens rea to evade tax is essential for imposition of penalty. The factual aspect in the present case clearly does not indicate any mens rea whatsoever for evasion of tax. The goods were accompanied by the relevant documents. The relevant paragraph of the said judgment reads as under:
“8. Upon perusal of the judgments, the principle that emerges is that presence of mens rea for evasion of tax is a sine qua non for imposition of penalty. A typographical error in the e-way bill without any further material to substantiate the intention to evade tax should not and cannot lead to imposition of penalty. In the case of M/s. Varun Beverages Limited (supra) there was a typographical error in the e-way bill of 4 letters (HR – 73). In the present case, instead of ‘5332’, ‘3552’ was incorrectly entered into the e-way bill which clearly appears to be a typographical error. In certain cases where lapses by the dealers are major, it may be deemed that there is an intention to evade tax but not so in every case. Typically when the error is a minor error of the nature found in this particular case, I am of the view that imposition of penalty under Section 129 of the Act is without jurisdiction and illegal in law.”
6. In light of the above, I am of the view that the finding of the authorities with regard to intention to evade tax is not supported by the factual matrix of the case, and accordingly, the impugned orders dated February 22, 2020 and March 19, 2020 are quashed and set aside.
7. This Court directs the respondents to refund the amount of tax and penalty deposited by the petitioner within a period of four weeks from date.
8. The instant writ petition is allowed in aforesaid terms.
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